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MF Global's investment banks to settle suit for $74 million

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(Reuters) — Seven investment banks of the failed MF Global Holdings Ltd. reached a partial settlement with investors who had filed a lawsuit in 2011 seeking to hold them and some of the brokerage's executives, including its CEO, responsible for its collapse.

The proposed settlement calls for the seven investment banks, which underwrote investment offerings, to pay the plaintiffs $74 million, according to court papers filed in a New York court on Thursday.

The banks cited in the settlement are Citigroup Inc., Deutsche Bank A.G., The Goldman Sachs Group Inc., JPMorgan Chase & Co., Merrill Lynch, Pierce, Fenner & Smith Inc., RBS Securities Inc. and Sandler O'Neill & Partners L.P.

Once run by former Goldman Sachs co-chairman and New Jersey Gov. Jon Corzine, MF Global collapsed amid worries about Mr. Corzine's $6.3 billion bet on European sovereign debt and the use of customer money to cover liquidity shortfalls.

Former stockholders and bondholders led by the Virginia Retirement System and the province of Alberta, Canada, had accused MF Global of inflating its ability to manage risk, obscuring the risks of its big bet on European sovereign debt, and improperly accounting for deferred tax assets.

The investor lawsuit, which seeks class action status, covers investors in MF Global common stock, convertible bonds and senior notes between May 20, 2010, and Nov. 21, 2011.

The settlement must be approved by a federal judge, according to the court papers.

The case is In Re: MF Global Holdings Ltd. Securities Litigation, U.S. District Court, Southern District of New York, No. 11-07866.

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